Indian equity markets posted their steepest weekly losses in well over a year during the truncated four-session week of March 2–6, 2026. With markets closed on Tuesday for Holi, trading reopened to a brutal gap-down on Wednesday — and the bulls were unable to mount a sustained recovery.
The Nifty 50 shed approximately 645 points or ~2.5% over the week, closing at 24,450 — its lowest level since April 2025 — while the BSE Sensex plunged ~1,950 points or ~2.4%, settling at 78,919. Both indices are now down roughly 5–6% year-to-date, underperforming most global peers.
The primary trigger was the escalating military conflict between the US, Israel, and Iran. Brent crude surged to a 20-month high of $87.66 per barrel. For India, which imports over 85% of its crude oil, this is a three-way blow: imported inflation, a wider current account deficit, and delayed RBI rate cuts.
| Date | Nifty Close | Change | Sensex Close | Key Theme |
|---|---|---|---|---|
| Mon, Mar 2 | 24,866 | ▼ 1.24% | 80,239 | Crude spike, FII outflows |
| Tue, Mar 3 | Market Closed — Holi Holiday | |||
| Wed, Mar 4 | 24,481 | ▼ 1.55% | 79,116 | Gap-down open; oil & Iran fears |
| Thu, Mar 5 | 24,766 | ▲ 1.17% | 80,016 | Iran diplomacy hopes; short-covering |
| Fri, Mar 6 | 24,450 | ▼ 1.27% | 78,919 | Bears return; banking selloff |
Of the 16 major sectoral indices, 15 closed in the red for the week. Banking and financial services bore the brunt of the selloff, as investors worried elevated crude prices could fan inflation and defer RBI rate cuts. Defence stocks bucked the trend sharply — gaining nearly 6% on geopolitical tailwinds and new order flows.
| Stock | Move |
|---|---|
| Paras Defence | +7.5% |
| Mazagon Dock | +5.0% |
| DCX Systems | +7%+ |
| United Breweries | +6.5% |
| IndusInd Bank | +3.3% |
| Coal India | +2.0%+ |
| Stock | Move |
|---|---|
| Petronet LNG | −9.0%+ |
| Eternal (Zomato) | −8.6% |
| Tata Steel | −6.8% |
| Tech Mahindra | −6.8% |
| ICICI Bank | −3.4% |
| HDFC Bank | −2%+ |
Foreign Institutional Investors (FIIs) remained persistent net sellers through the week, continuing a trend that has seen a record ₹1,66,283 crore exit Indian equities in 2025. On Monday alone, FIIs offloaded equities worth over ₹3,296 crore. Domestic Institutional Investors (DIIs) — buoyed by steady SIP flows — stepped in as consistent buyers, cushioning the fall.
Escalating strikes involving the US, Israel, and Iran pushed Brent crude to $87.66/bbl. Near-total suspension of shipping through the Strait of Hormuz spooked global markets. India, importing 85%+ of its crude, faces the dual hit of higher inflation and a wider current account deficit.
Petronet LNG declared force majeure on LNG shipments from QatarEnergy due to Strait of Hormuz security risks, sending the stock plunging over 9%. The disruption raised concerns about India's LNG-dependent power and fertiliser sectors.
The RBI publicly assured IndusInd Bank's stability and initiated remedial steps to address earlier accounting discrepancies. The stock rebounded 3.3% on the back of this statement.
The Nifty Defence index surged ~6% even as the broader market bled. Paras Defence rose 7.5% after an MoU with South Korea's Green Optics, while Mazagon Dock climbed 5%+ on a ₹99,000 crore naval deal.
Regulators floated guidelines requiring banks to ensure customers voluntarily choose insurance products. Banking and insurance stocks came under pressure as investors evaluated potential non-interest income hits.
Statistical method revisions pushed India's GDP growth estimate upward to 7.8%, reflecting underlying economic resilience even as markets corrected. The figure underscores India's long-term growth story.
Broader markets fared relatively better on some sessions — the Nifty Midcap declined 0.7% and the Smallcap index slipped just 0.24% on Friday alone, demonstrating that domestic retail participation is still providing cushion.
Even as equity markets sold off sharply through the week, India's mutual fund industry continued to demonstrate its characteristic structural resilience. The most recent AMFI data (January 2026) painted a nuanced picture: SIP contributions remained robust at ₹31,002 crore, SIP accounts crossed the 10.29 crore mark, and industry AUM crossed the ₹81 lakh crore milestone for the first time. However, equity inflows moderated for the second consecutive month, with investors rotating toward gold and debt amid volatility.
Net equity inflows fell 14% MoM to ₹24,028 crore in January — the second successive monthly decline and a steep 39% drop YoY. The peak of ₹42,702 crore in July 2025 feels distant. Mid-cap and small-cap fund inflows declined 24% and 23% respectively, reflecting investor caution after double-digit corrections in these categories.
In a historic first, Gold ETF inflows of ₹24,040 crore in January almost exactly matched equity fund inflows — up 106% from December. This marks the first instance in AMFI history where gold ETF flows approached equity flows, as investors sought safe-haven assets amid geopolitical uncertainty.
SIP flows of ₹31,002 crore remained broadly stable. Total SIP accounts surpassed 10.29 crore, with ~74 lakh new SIPs registered in January. SIP assets now account for 20.2% of total industry AUM — a structural milestone that makes Indian markets more resilient to FII selling.
After two months of massive outflows totalling ₹1.58 lakh crore, debt funds staged a strong reversal with ₹74,827 crore in inflows in January. Overnight and liquid funds led the charge, while gilt funds attracted marginal but notable inflows — a tell-tale sign that rate-cut positioning is underway.
| Category | Jan '26 Inflow (₹ Cr) | MoM Change | Investor Signal |
|---|---|---|---|
| Flexi-Cap | 7,672 | ▼ 23.4% | Highest equity category; still preferred |
| Midcap | 3,185 | ▼ 24% | Caution as index corrected ~14% from peak |
| Large & Mid-Cap | 3,181 | — | Steady interest; quality bias emerging |
| Small-Cap | 2,942 | ▼ 23% | Flows resilient despite sharp index correction |
| Large-Cap | 2,005 | ▲ 28% | Flight to quality; gaining share |
| Focused Funds | 1,556 | ▲ 47% | Active management preference rising |
| Gold ETFs | 24,040 | ▲ 106% | Record inflows; safe-haven rush |
| ELSS | −594 (outflow) | — | Tax-season profit booking |
| Debt — Liquid | 30,682 | ▲ Strong | Parking short-term money; rate cut wait |
Volatility is unlikely to abate quickly. With geopolitical tensions still elevated and crude prices above $85/bbl, India's macro vulnerabilities — imported inflation, rupee pressure, and delayed rate cut expectations — remain front and centre. Analysts broadly see the Nifty range at 24,000–25,000.
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